Tax-exempt NISA will attract between ¥6 trillion and ¥14 trillion annually over the next five years, potentially reaching an estimated ¥68 trillion, according a joint report from Cerulli Associates and Nomura Research Institute (NRI) entitled Asset Management in Japan 2013: Opportunities and Challenges for Foreign Managers.
The report is the inaugural result of the collaboration by Cerulli Associates, a research firm specializing in global asset management and distribution trends, and NRI, a leading provider of consulting services and system solutions.
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Under NISA guidelines, beginning Jan. 1, 2014, individuals may annually invest up to ¥1 million in a tax-free account for up to five years. The research examines the investment vehicle’s impact on various asset classes, outsourcing, and asset managers.
With taxation on dividends and capital gains in Japan increasing from 10% to 20% in 2014, banks are eager to shrink their balance sheets in the inflationary environment.
Yoon Ng, director at Cerulli Associates, said: "The projected NISA market growth would represent both a massive change in the mind-set of Japanese households and a greater willingness to leave the sanctuary of safe assets."
Sadayuki Horie, Senior Researcher at NRI, said: "Our research shows that as many as 31 million people could use the new savings account, especially as changes to pensions and the likelihood of inflation will put a greater onus on the individual to protect their assets. Just as importantly though, it will provide a much-needed injection of funds to a moribund investment trust industry."
Key observations from the report on the Japanese investor landscape include:
Japan’s pension funds are the country’s largest institutional investor bloc with total assets of ¥277 trillion as of March 31, 2013.
Financial institutions’ securities holdings, which totaled ¥823 trillion as of March 31, 2013, were predominantly domestic government bonds.
Changes to securities taxation will encourage growth in the investing class, increasing demand for new products and outsourcing opportunities.
Foreign asset managers must comply with highly idiosyncratic Japanese business processes and provide superior service to their clients.
As Japanese asset managers are increasingly outsourcing back-office functions to cut costs, foreign managers that embrace business process outsourcing (BPO) are better positioned to win new business.
The reform plan of the Government Pension Investment Fund could have substantial impact on public pension fund business and increase demand on high alpha products & alternative investment products.
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